IMF Cautions UK Against Prolonged High Interest Rates Due to Mortgage Reset Risks

• IMF warns Bank of England against keeping interest rates too high for too long due to high proportion of UK mortgages on fixed rates • Over 80% of UK home loans have fixed rates, usually for 5 years or less; 1.5 million will reset in 2024 • Prolonged high rates could lead to sharp drop in consumption, house price declines, and more mortgage defaults as fixes end • Households took advantage of low rates pre-pandemic, but hikes since 2021 have led to highest effective mortgage rates in decades • IMF urges regulators to monitor growth of private lending market, which has risen rapidly but lacks transparency on risks